Published: Mar 14, 2024
Time to read: 6mins
Category: Compensation

How to Research and Select Your Perfect Compensation Software Vendor in 3 Steps

Managing compensation and total rewards for hundreds or thousands of employees is essential—and challenging! Compensation management software makes it easier, but researching and selecting a vendor isn’t always as simple as it seems.

As you get ready to tackle your vendor research, there are several effective ways to identify providers. For example, you may be tempted to consult with peers in your industry, but remember their organizational needs and culture may be completely different from your own.

You’ll want to spend some time searching online to see what vendors and technologies are available. You can also use analyst reports to help narrow down the number of solution providers to assess. If you have a smaller team or a short timeline, another option is to turn to consultants who can assist you with the vetting process.

Options for Identifying Compensation Solution Providers

SourceTime RequiredComprehensiveBiasCost
Web SearchHighHighMediumLow
Peer RecommendationLowMediumHighLow
Analyst ReportsLowHighLowHigh

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Whatever method you choose, research will have to be done to make sure a solution’s capabilities align with your requirements and goals. Once you’ve created your shortlist of providers (we suggest no more than two to three), the next step is to create a request for proposal (RFP) for the providers to complete. From there, you’ll participate in demos and discuss them as a team.

Step 1: Create an RFP That Meets Your Organization’s Needs

Creating a comprehensive RFP is a critical step in narrowing down compensation solution providers. The questions you ask in your RFP will help your organization understand how each provider’s offering meets your requirements. Your questions also give you greater insight into that provider’s experience and expertise.

List your detailed requirements as a series of capability questions. Then ask vendors to indicate if each feature:

  • Is included in the standard product
  • Will be available by a specified date
  • Is otherwise available on a custom basis for an additional cost

Your RFP should include your required product features and functions. Some examples include:

  • Architecture and technical requirements, such as security, accessibility, compatibility with specific databases, web technology, reporting and analytics, record management, etc.
  • Integration with payroll, employee master files, HRIS, ERP, and other systems (and additional costs)
  • Services expectations, including implementation, training, staffing, support, consulting, and maintenance

Your specific compensation requirements may include:

  • Ability to handle merit increases, off-cycle rewards, incentive pay, bonuses, and long-term incentives
  • Capabilities that will allow for the integration with performance management
  • Ability to support agile decision-making, employee communications, and advanced analytics

Also, consider asking vendors for the following:

  • Their company's financial viability, market share, strategic partnership, industry leadership, number of employees, years in the business, and support model
  • Solution costs, including all fees associated with SaaS or on-premise software, any support fees, training, customer support, and implementation services fees
  • Information on the number of customers the provider serves and whether they support other organizations in your industry
  • Customer references

Step 2: Request a Product Demonstration

Set up a demo with only those providers that meet your primary needs. The demo is your first chance to have an in-depth look at the system and its user interface, and to get a sense of its ease of use. You’ll also have an opportunity to ask questions that help you see how the solution will fit into your current workflow. The best providers will partner with organizations and offer their expertise. They’ll focus on how their solution can adapt to your process, rather than saying how you’ll need to adapt your process to fit their solution.

LEARN MORE | ‘How to Gain a Competitive Edge With Compensation Technology

Ask These Questions on Demo Day

As you participate in the demo, consider asking the following questions:

  • Does the solution meet the base system requirements we need?
  • How will this solution integrate with our current systems?
  • Will this solution accept historical data (employee profiles, performance ratings and other information, succession management data, reporting records, etc.) from our current system? If so, how many years of data can be included?
  • How often are software updates released?
  • How long does implementation typically take for an organization of our size with similar requirements?
  • What type of support team will we be working with daily? Who is included on that team?
  • What type of training will be provided to the HR team, our assigned system administrator, and end-users of the system?
  • What’s included in a standard scope of work, and what is the pricing for enhancements or add-ons?
  • If we have trouble with the solution, what is the process to resolve the issue and how quickly does that typically happen?
  • How configurable is your system without incurring additional costs? Are there customizations available with this solution? If so, how are these priced?
  • Can we add more features or modules later? Are features and modules upgraded automatically, or do we have to turn them on with each new release?
  • What type of reporting and analytics are part of this solution?
  • What can you tell me about the data security of your solution?

Step 3: Determine Your Expected Costs

As part of your selection process, ask vendors for estimated license and implementation costs. A vendor will need to conduct a thorough discovery process to understand the specific needs of your organization and create an accurate quote. For example, if you’re a global organization, your vendor might recommend you partner with a global payroll provider or use an ERP system that provides some global functionality. Both of these options would likely increase your spending. Custom work, such as specialized interfaces or report formats, can also increase your costs.

As you continue to assess your needs and research vendors, you’ll find there are several compensation systems available. The key is finding a solution that’s meticulously crafted to cater to your enterprise organization’s unique requirements. The right solution for you will provide the tools you need to design, model, and manage pay and reward programs that ultimately allow you to reward your staff and remain competitive.

Invest In a Compensation Solution That Drives Your Business Forward

Want more tips and tricks for finding your perfect total rewards solution? Download our ebook, ‘The Ultimate Buyers’ Guide for Compensation Management: How Your Strategy Should Drive Your Technology,’ or request a PeopleFluent demo today to see first-class compensation software in action.

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